Energy Co-ops in America

Chances are that if you're in America, the computer from which you're reading drew its electricity from a commercial power company. Commercial power companies are investor-owned companies that produce energy through a variety of means - coal, natural gas, wind, solar, etc. -- that they eventually deliver to consumers at a profit. They service most cities and suburbs of America, amounting to nearly 88% of the entire U.S. population.

But what of the other 12%?

These people are generally serviced by electric cooperatives, or co-ops for short. Electric co-ops are companies that are owned by their consumers; therefore, they are not necessarily profit driven like commercial entities. Owing to a massive social welfare program in the 1930's, FDR's Rural Electrification Administration, rural residents were given low-interest loans for the purpose of banding together to create electric co-ops. As a result of the REA, electric co-ops sprouted up all across America, eventually covering 75% of the land area of the nation.

Electric co-ops offer some promising pros above commercial power companies.

For instance, they are more beholden to their members. Those that adhere to the "7 basic principals of cooperatives" have voluntary membership, democratic member control and transparent economic participation. Voluntary consumption and democratic control of the co-op essentially gives consumers a "double vote": they may vote once on all the financial and legal decisions, like the commissioning of new power plants and such. Then, if they strongly disagree with the decisions, which are more transparent than in commercial companies, they may remove themselves from the consumer pool and switch providers.

"Co-ops are the original self help organizations," Mary McLaury told me during a phone interview, "and their organizational structure makes them ideal test beds for new technologies." The Executive Director of Touchstone Energy Cooperatives, a network of 750 electric co-ops that covers 46 states and 32 million people, she has worked with co-ops her whole life. Mrs. McLaury pointed to Midwestern energy co-ops deploying automated meters1 and experimenting with solar irrigation as specific examples of innovation. "Indeed, coops are very much investors in communities."

The ability for co-ops to move to a distributed system is especially interesting as far as green energy is concerned. If a generation system comprised of a few large coal plants resembles somewhat a highly centralized monarchy, then a system of rooftop solar or small wind turbines resembles a more distributed, democratic system of control. "[As America's energy technology developed], utilities grew as natural, regulated monopolies. And that worked well," said Mrs. McLaury. But now, as green technology seems at the cusp of out-competing coal in numerous ways - cost, cleanliness, social responsibility - perhaps the co-op model is a necessary next step.

However, currently, electric co-ops may not quite be up-to-par with their principals.

First, consumers generally don't have a choice over who they get their electricity from. John Farrel, a Director at the Institute for Local Self-Reliance, writes, "If you want electricity in cooperative territory, you [must] sign with the cooperative." Martin Lowery, an Executive Vice President at the National Rural Electric Cooperatives Administration (NRECA) concurred, saying during an interview, "Certified service territories are drawn and fixed."

Second, it is unclear whether the democracy of the co-ops is truly robust. "One member one vote works best," said Mr. Lowery, but some of the co-ops NRECA represents give one vote per meter, which gives larger farmers and industries with many meters more voting power. And even when a co-op has proper member representation, some may suffer from low member participation. "Co-ops are as strong as their membership participation. Co-ops and democracy share the same risk: disengagement," said Mr. Lowery.

As a result, co-ops may act adversely to how one expects. For example, co-ops in Minnesota opposed every single bill favoring clean energy in the 2013 session, despite a survey indicating that rural residents generally favored green energy. Co-ops nationwide opposed the 2009 cap-and-trade bill, and Obama's 2015 Power Plan. Indeed, Mrs. McLaury declined to comment on Obama's Power Plan to me.

However, perhaps the biggest gummer of the democracy of co­-ops are the long term Power Purchase Agreements (PPAs) that they sign. PPAs are contract where an entities like municipalities, investor-owned utilities, or co­ops can buy electricity from generating companies at a fixed price for a certain number of years. When a co-op signs a 40-or-50 year PPA with a coal power plant, they are locked into a situation that their members will not be able to re-evaluate for decades. This is a potential factor in the lowering of participation, and removes a lot of the "autonomy and agility" that proponents of co-ops, like Mrs. McLaury, say are important.

However, there might be hope.

Co-ops are extremely dependent on the political regulations of the country in which they are based, and recent federal legislation may make it easier for energy co-ops to live up to their green, democratic potential. The USDA's Energy Efficiency and Conservation Loan Program was started in 2014 to provide low interest loans to co-ops for renewable energy investments. It has had some success, and a Wisconsin co-op called Dairyland made a series of 10-20 year PPAs that will almost double the amount of solar in the state.

"[PPAs can be] especially important for renewables," says Mimi Zhang, a green energy industry expert who has worked for years in energy consulting, "as they eliminate the economic risk of volatile spot market energy prices and help developers secure project financing." The recent moves of Dairyland demonstrate this, and hopefully other co-ops may be able to follow suit.

So this is all good, but what can an urban reader do if they think energy co-ops sound promising?

Unfortunately, your hands are fairly tied. If you happen to have the choice of where your electricity comes from, then vote with your wallet (for example, New Yorkers buying from ConEdison are able to stipulate that their energy comes from wind for an additional $2 a month.) If you don't, you may support a social movement in your certified service territory: with enough support, local politicians may approve a switch from commercial to cooperative providers.

One of the biggest things you might consider doing is joining a co-op of different form. Local, organic food co-ops are a good option. "Food co-ops are the fasting growing type of co-ops in the nation," Mrs. McLaury said. Participation in one co-op may lead to another, a European study found.

At their heart, the principals of a co-op are one that I believe we should all consider highly. We might overlook some of the ways that energy coops have lacked in the past, and look to the future for how they might lead.

1. Interestingly, the industry has moved the language from "smart meter" to "automated meter" to create more goodwill towards the product, as Mrs. McLaury told me.